United Kingdom: Selected Issues
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International Monetary Fund. European Dept.
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Publication Date:
28 Jul 2014
eISBN:
9781498304337
Language:
English
Keywords:
ISCR; CR; price; house price; investment; ratio; business investment; capital productivity; investment model; investment determinant; resource allocation; capital allocation; Total factor productivity; Global financial crisis of 2008-2009; Productivity; Capital productivity
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In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Abstract

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Growth Prospects in the UK: The Role of Business Investment1

Is the current uptick in business investment durable? This is the focus of this chapter. Investment models based on firm level data suggest that weak demand, financial market frictions, and heighted uncertainty largely explain the underperformance of business investment in the UK over the past few years. With these key investment determinants improving, business investment is now recovering. However, to sustain the momentum and anchor durable growth, recovery in productivity is imperative. To this end, the efficiency of the capital allocation mechanism needs to be restored, and the banking system should take a more active role.

A. Introduction

1. After a prolonged period of weakness, business investment in the UK is recovering. Business investment was hit hard by the global financial crisis, falling by 20 percent in 2008–09. The pace of investment recovery thereafter was weak compared to many other advanced economies and previous UK recessions. More recently, however, business investment has begun to grow, up 10 percent year on year in the first quarter of 2014.

2. A durable recovery in business investment is critical to anchor sustainable economic growth. Beyond boosting demand, investment will enhance the productive capacity of the economy and contribute to rebalancing away from consumption and towards external demand (McCafferty, 2014, and IMF, 2014). The focus of this chapter is to assess whether the recent uptick in investment indicates a turnaround in the trend and to discuss the role of business investment in the UK’s growth prospects.

Figure 1.
Figure 1.

Business Investment

(Index, 2009Q1 = 100)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Source: Haver Analytics.
Figure 2.
Figure 2.

UK: Business Investment

(Indices, pre-recession peak=100)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Sources: Haver Analytics; and IMF staff calculations.

B. UK Investment Trends and Economic Performance—the Long-Run View

Before the crisis, growth in the UK was strong and broad-based

3. Business investment played an important role in boosting the UK’s pre-crisis growth. In the decade leading to the global financial crisis, business investment grew 4 percent a year on average, with the capital-to-labor ratio rising faster than in many other economies. Alongside, capital productivity (measured as output divided by net capital stock) grew faster than in many other advanced economies, reaching the highest level just before the global financial crisis erupted.

4. Supply-side growth accounting confirms that growth in the UK was broad-based in the pre-crisis years (1997-2007).

  • Capital was the most important driver of overall growth. Moreover the large accumulation of capital in information and communication technology (ICT) boosted growth directly and indirectly (through its contribution to higher productivity growth).

  • Total factor productivity explained about 20 percent of growth. Labor also grew strongly and accounted for about one third of overall growth.

  • The even contributions of factor accumulation and productivity growth in the pre-crisis era suggest that growth in the UK was broad-based. While a similar pattern was observed in the U.S., other major advanced economies grew at lower rates, with uneven sources of growth. Germany experienced robust total factor productivity growth, but the contribution of labor and capital was relatively weaker. In France and Japan, total factor productivity growth was particularly weak.

Figure 3.
Figure 3.

UK: Real Growth and Business Investment

(Average; percentage points)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Source: Haver Analytics.
Figure 4.
Figure 4.

Capital Productivity

(GDP divided by net capital stock)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Sources: Annual macro-economic database; and IMF staff calculations.

Selected Countries: Growth Accounting

(Annual percent change)

article image
Sources: UK ONS; and The Confederation Board, Total Economy Database.

The composition of ICT and Non ICT is estimated using Confederation Board Data.

5. The UK’s strong growth performance was also supported by an efficient allocation of resources. If resource allocation mechanisms are efficient, a sector with higher profitability, or better growth prospects, should attract more factors of production, such as capital. There is evidence that before the crisis, the UK’s fast growing industries with higher total factor productivity growth—such as information, communication, professional, and technical services—attracted more capital. Hence, the shift in capital appears to have been efficient in the pre-crisis periods, contributing to increases in total factor productivity and output at the aggregate level.

Figure 5.
Figure 5.

UK: Growth of Gross Value Added, Capital, and Productivity 1/

(Average growth in 1995–2007, percent)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Sources: EU KLEMS database; and IMF staff calculations.1/ The size of the bubble indicates the annual average growth rate of real gross value added, with the growth rates in the parenthesis.

But the crisis appears to have broken the UK’s positive growth pattern

6. As elsewhere, the crisis hit the UK economy hard as investment and productivity collapsed. Between 2008 and 2010, GDP growth averaged minus 1.5 percent, among the deepest contractions in advanced economies. This was largely accounted for by a sharp decline in total factor productivity, and to a lesser extent, by reduced labor inputs and slower capital accumulation.2

7. More recently, the economy has rebounded, driven mainly by strong labor growth. Employment growth rebounded strongly in 2011–12, while capital accumulation has remained weak, and total factor productivity has continued to be a drag on growth.

Selected Countries: Growth Accounting

(Annual percent change)

article image
Sources: UK ONS; and The Confederation Board, Total Economy Database.

The composition of ICT and Non ICT is estimated using Confederation Board Data.

8. Furthermore, there is evidence that capital allocation mechanisms have weakened. Capital productivity, which fell sharply at the onset of the crisis, remains well below pre-crisis levels, apparently reflecting possible impairments in capital allocation mechanisms (see also Barnett et.al, 2014; and Broadbent, 2014).3 The decomposition of capital productivity suggests that in the pre-crisis years, capital productivity growth was supported by positive allocational effects (i.e., shifts of capital from lower to higher productivity sectors) offsetting negative direct effects (i.e., decreases in sectoral capital productivity). By contrast, after the crisis, aggregate capital productivity fell sharply, as sectoral productivity dropped and the reallocation effect weakened.

Figure 6.
Figure 6.

UK: Capital Productivity

(Real GDP divided by net capital stock; 2000=100)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Sources: ONS; The Conference Board Total Economy Database; and Haver Analytics.1/ Excluding the dwelling sector.
Figure 7.
Figure 7.

UK: Decomposition of Capital Productivity Growth 1/

(Percentage points)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Sources: ONS; Haver Analytics; and IMF staff calculations.1/ Data for 2010 and beyond are estimated with investment figures.

C. Diagnostic: Explaining Business Investment Performance in the UK

9. Weak demand prospects, financial market frictions, and heightened uncertainty largely explain the UK business investment trend of the past few years. Using firm-level panel data on listed non-financial firms, investment models are estimated (Appendix I).4

Main regression results (Appendix Table 1 Model 1)

10. Demand for investment is considered to be positively associated with sales levels and profitability and negatively with the cost of capital.

  • A firm’s specific demand is captured by its Sales Gap (defined as a firm’s de-trended sales). The coefficient on this variable is positive and statistically significant, validating the narrative of recent investment developments: in the aftermath of the global financial crisis, firms faced a large negative demand shock and cut back investment, whereas more recently, however, prospects for final demand have risen, and so have firms’ intentions to invest. Furthermore, as expected, the coefficient on firms’ profitability (Return on Assets) is positive and statistically significant.

  • The coefficient on Cost of Debt (a proxy variable for the cost of capital) is negative and statistically significant, providing evidence that higher borrowing costs are negatively associated with firms’ desired stock of capital. To support demand, the policy interest rate was reduced to near the zero-lower bound. However, borrowers’ risk premium rose, and the cost of debt did not fall as much.5

Figure 8.
Figure 8.

UK: Cost of Debt and Policy Rate

(Median, percent, interest divided by total debt)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Sources: Datastream; and IMF staff calculations.

11. The state of a firm’s balance sheet would also matter for investment, particularly as financial market imperfections prevail.

  • As the cost of financing increases with asymmetric information, a firm would prefer internal financing first, then debt, and lastly equity financing (Pecking Order Theory). Indeed, UK firms rely on internal funds for at least 60 percent of business investment, and the reliance on internal funds has apparently increased since the onset of the crisis (McCafferty, 2014). Consistent with the theory and stylized facts, the empirical results suggest that a firm’s retained earnings (Retained Earnings) are positively associated with investment.

  • This said, external financing remains important. The coefficient on Long-Term Debt is positive and statistically significant, suggesting that UK firms would invest more if they had more access to external finance.

  • A firm’s profit distribution policy could also affect investment. The coefficient on Cash Dividend Payments (as a share of operating profits) is negative and statistically significant, suggesting that a firm’s owners might discount future profits excessively and prioritize near-term outcomes over longer term investment opportunities (short-termism).6

12. Many investment projects can be considered as irreversible. As Policy Uncertainty rose, firms might have postponed investment projects, as these are long-term and largely irreversible in nature. The empirical results support this hypothesis, with the coefficient on the Policy Uncertainty variable negative and significant. Given that this recession was particularly deep and prolonged, the policy uncertainty channel appears to have played a substantial role in weakening investment (Baker, Bloom, and Davis, 2013).7

Is there any evidence of weakened efficiency in the capital allocation mechanisms?

13. If resource allocation mechanisms are efficient, firms with higher profitability would attract more capital, as evidenced by the positive coefficients on profitability variables in Model 1. To examine a possible structural shift leading to a disruption in the capital allocation mechanism, pre-crisis dummy variables (1 for observations up to 2007, and zero thereafter) are included and interacted with the profitability and constant terms (Model 2).

14. Evidence is found that the efficiency of capital allocation has weakened.8 The coefficient on the profitability variable interacting with the pre-crisis dummy is positive (0.058) and significant. This suggests that business investment was more sensitive to profitability in the pre-crisis periods than in the post-crisis periods—evidence that the allocation of capital was more efficient before the crisis. Furthermore, the long-run elasticity of investment to profitability fell from 0.17 in the pre-crisis period to 0.08 in the post-crisis period.9

Is investment recovery important for external rebalancing?

15. There is evidence that exporters tend to invest more than domestically oriented firms do, all else equal. The exporter dummy variable is significant and positive, suggesting that demand for investment in the export sector is higher on average (Model 3). This also indicates that stronger investment could be associated with stronger exports.

Figure 9.
Figure 9.

Volatility of External and Domestic Demand

(5-year rolling standard deviation of GDP growth, in percent)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Sources: Office for National Statistics; and Haver Analytics.

16. Moreover, exporters are more sensitive to productivity, while non-exporters care more about domestic policy settings.

  • For average exporters, the coefficient on Return on Assets is higher than that for non-exporters, which may reflect their greater exposures to competitive global markets (Models 4 and 6). Furthermore, the coefficient on Sales gap for exporters is smaller than for non-exporters—thus exporters are more cautious in increasing capital stock given particular demand than non-exporters—, which likely reflects the fact that external demand has been more volatile than domestic demand (and increasingly so in recent years). Alongside, the regression results indicate that long-term debt for average exporters is positive and significant. All these results suggest that exporters are constrained more by demand prospects and less by financing.

  • For non-exporters, investment is more sensitive to the interest rate and policy uncertainty, as coefficients on Effective Interest Rate and Policy Uncertainty are negative and relatively large.

  • Resource allocation efficiency problem appears to be more evident for exporters: the coefficient on the profitability variable interacting with the pre-crisis dummy is positive and significant (Model 5), suggesting that investment in the export sector has become less sensitive to profitability since the great recession. For non-exporters, such evidence is weaker, as the coefficient of the interaction term is not statistically significant (Model 7).

Are investment determinants in the UK different from those in other advanced economies?

17. While investment determinants for firms in the U.S., France, and Germany are broadly similar to those in the UK, some differences are noticeable (Appendix Table 2). In particular:

  • There is no clear evidence of capital allocation mechanisms becoming less efficient since the crisis in the other three countries. The coefficients on return on assets interacting with the pre-crisis dummy variable are negative and insignificant for the U.S., France, and Germany.

  • For French firms, the coefficient on the demand variable interacting with the pre-crisis dummy is negative and significant, suggesting that French firms have become more cautious in investment following the crisis, similar to UK firms.10

  • To analyze similarities among these countries, an investment model is estimated by pooling data for all countries and adding country dummy variables (Model 12). The results suggest similarities between UK and US firms, as the size of the coefficient on the UK dummy is much smaller than that on Germany and France dummies.

D. Discussion

Regression results anticipate a pick-up in business investment in the near-term

18. The regression results indicate that the undergoing recovery in business investment reflects improvements in investment determinants. UK firms have been increasingly confident about turnover, and Bloom’s policy uncertainty index—which rose sharply at the onset of the crisis and stayed high thereafter—has fallen significantly in recent months, while firms’ profitability has returned to its pre-crisis level. These recent indicators suggest that an upturn in business investment would be durable.

Figure 10.
Figure 10.

BCC Survey: Turnover Confidence: Next 12 Months

(Balance in percent)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Source: Haver Analytics.
Figure 11.
Figure 11.

UK: Bloom’s Policy Uncertainty

(Index)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Source: Economic Policy Uncertainty website, http://www.policyuncertainty.com/europe_monthly.html

But capital allocation mechanisms continue to be weak

19. There is no clear consensus on why the efficiency of capital allocation mechanisms remains weak. One possible explanation is a weakness in financial intermediation. The banking system in the UK was hit hard by the global financial crisis. To a variable extent, firms rely on bank financing to expand, renovate, and restructure their business models to bolster their activity and productivity. Hence, banking sector weaknesses could affect firm productivity because firms would face higher interest rates or difficulty in securing bank financing. In fact, although real lending rates for large firms have dropped to around zero percent, those for smaller firms—some of them may be facing the problem of lack of sufficient collateral or good credit records—have remained at relatively elevated levels.

Figure 12.
Figure 12.

UK: Real Lending Rates by Size of Loans

(Percent, new fixed rate loans, deflated by CPI inflation)

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Source: Haver Analytics.

20. There is also evidence that banks are less active in allocating credit across business sectors, thus hindering the efficient allocation of capital. A simple measure of sector credit shift is calculated as the dispersion of growth rate of bank loans across sectors (Text Figure). The degree of credit shifts can be considered to reflect either the size of sectoral shocks or the efficiency of financial intermediation. As seen in the figure, the size of sectoral credit shifts has decreased since the great recession, which, together with stagnant growth in aggregate loans, would evidence weakened financial intermediation channels.

Figure 13.
Figure 13.

UK: Sectoral Credit Shift Indicator

Citation: IMF Staff Country Reports 2014, 234; 10.5089/9781498304337.002.A002

Sources: Haver Analytics; and IMF staff calculations.

E. Concluding Remarks and Policy Recommendations

21. The empirical results suggest that the current pick-up in business investment is likely to be sustained. Facing a large negative demand shock in the aftermath of the global financial crisis, firms held back investment. Firms’ profitability also dropped sharply, further dampening their incentives to invest. To support demand, the policy interest rate has been reduced to the zero-lower bound, but the cost of capital has not fallen as much, as the risk premium for firms’ borrowing rose. Furthermore, policy uncertainty rose, particularly severely this time due to the depth and scale of the recession following the crisis. However, more recently, key investment determinants—including demand prospects, firms’ profitability, and policy uncertainty indicators—are improving, hence supporting a recovery in business investment.

22. For sustainable and solid growth, business investment is critical, but is not enough by itself. If business investment continues to grow, this would help rebalance the economy away from consumption, but also strengthen the productive capacity of the economy. Notwithstanding these positive developments, restoring the allocational efficiency of capital is essential for productivity recovery.

23. A challenge is to formulate appropriate policy prescription. Over the past few years, the government has rightly taken various measures to stimulate investment and enhance long-run growth potential, including boosting capital expenditures, expanding financial incentives to stimulate private investment, establishing new institutions (such as Business Bank), and strengthening the banking system. But more could be done.

  • First, efforts should continue to improve financial intermediation, especially aimed at ensuring adequate access to finance for business innovation and restructuring.

  • Second, infrastructure should continue to be improved, especially in the areas of transport, energy, and housing.

  • Third, as recommended by LSE Growth Commission (2013), corporate governance structure could be reviewed to address “short-termism” and encourage firms to invest more.

  • Finally, policies should continue to support human capital development, including through enhancing vocational training and apprenticeship programs to help bolster productivity. In this regard, the UK should not halt efforts to attract foreign talents.

Appendix 1. Regression Model Specification and Data

Using an annual firm-level panel dataset of listed non-financial companies, the following investment model is estimated.

( I i t K i , t − 1 ) = α 0 + α 1 ( I i , t − 1 K i , t − 2 ) + β 1 ∑ j = 0 1 D i , t − 1 + β z ∑ j = 0 1 Z i , t − j + d t + η i + ν i t

where i denotes a company, Iit is fixed investment, Kit fixed capital stock, dt time fixed effect, n firm fixed effect, and vit idiosyncratic shock. Dit is a vector of determinants of investment, including annual sales gap (reflecting demand prospects relative to historical averages), return on assets (reflecting profitability), the effective interest rate on debt (reflecting cost of borrowing), and Bloom’s policy uncertainty index (reflecting uncertainty). Zit is a vector of additional variables, including retained earnings and long-term debt (reflecting financial constraints); and cash dividend payments (reflecting allocation of internal funds).

In addition to the variables mentioned above, a lagged dependent variable is included to incorporate the dynamic effects of the capital stock. The dynamic effects capture the high persistence of investment on past realizations.

The sample dataset is unbalanced. The estimation method consists of the GMM-System estimator proposed by Arellano and Bond (1991), Arellano and Bover (1995), and Blundell and Bond (1998). The use of the GMM-System estimator is warranted as it addresses potential endogeneity problems and measurement errors in autoregressive models with high persistence in the data. The lagged levels of the explanatory variables are used as instruments.

The period covered in the regression analysis is from 1997 to 2012. All nonfinancial firms are included, except for firms in the oil and gas sector and public administration and defense sector. Firms with data outside of 1–99 percent of sample distributions are excluded as outliers.

Variable definitions

The data are from the Worldscope database (except for the uncertainty variable).

article image
Appendix Table 1.

UK: Determinants of Business Investment 1/

article image

System GMM specifications, with lagged values of repressors used as instruments. Robust standard errors in parentheses, with ***, **, * indicating significance level at 1 percent, 5 percent and 10 percent level respectively.

… indicates that variable is dropped due to collinearity.

Appendix Table 2.

Selected Advanced Countries: Determinants of Business Investment 1/

article image

System GMM specifications, with lagged values of repressors used as instruments. Robust standard errors in parentheses, with ***, **, * indicating significance level at 1 percent, 5 percent and 10 percent level respectively.

… indicates that variable is dropped due to collinearity.

References

  • Arellano, M. and S. Bond, 1991, “Some Test of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations”, Review of Economic Studies, vol. 58, pp. 277–297

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  • Arellano, M. and O. Bover, 1995, “Another Look at the Instrumental-Variable Estimation of Error-Components Models”, Journal of Econometrics, vol. 69, pp. 29–52

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  • Baker, S.R., N. Bloom, and S. J. Davis, 2013, “Measuring Economic Policy Uncertainty,” unpublished working paper, Stanford University and University of Chicago.

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  • Barnett, Alina, B. Broadbent, A. Chiu, J. Franklin, and H. Miller, 2014, “Impaired Capital Reallocation and Productivity,” Journal of the National Economic Institute and Social Research, May 2014; 228 (1), pp. R35–R48.

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  • Blundell, R.W. and S. Bond, 1998, “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models”, Journal of Econometrics, vol. 87, 115–143.

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  • Broadbent, Ben, 2014, “The Balance of Growth,” speech at The London School of Economics, London, on January 17, 2014

  • Haldane, Andrew G. and R. Davies, 2011, “The Short Long,” speech at 29th Société Universitaire Européene de Recherches Financières Colloquium: New Paradigms in Money and Finance?, Brussels, in May 2011

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  • International Monetary Fund, 2013, “United Kingdom: Staff Report for the 2013 Article IV Consultation, Annex 1, The Productivity Puzzle in the UK.”

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  • LSE Growth Commission, 2013, “Investing for Prosperity,” LSE Center for Economic Performance

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1

Prepared by Kotaro Ishi, Stephanie Denis (both EUR), and Carolina Osorio Buitron (RES). The analysis in this chapter is based on the data available as of end-June 2014.

2

The positive contribution from capital services to growth in 2008–10 may seem inconsistent with very weak investment after 2008. This is primarily because by construction, estimates of capital services reflect investments over multiple years (especially for long-lived buildings and structures) and do not account for the premature scrapping of assets.

3

This mirrors the weakening of labor productivity since the beginning of the crisis.

4

The data are from the Worldscope database, including about 5,000 firms, for the period of 1997–2012 (annual frequency). The dataset includes all non-financial industry, except oil and gas extractions, public administration, and defense.

5

See IMF, 2013, “United Kingdom: Staff Report for the 2013 Article IV Consultation, Annex 4, The Monetary Policy Transmission Mechanism, Credit and Recovery” for discussions about the evidence of credit supply problems.

6

Haldane and Davies (2011) argues that short-termism had adverse effects on investment even before the crisis.

7

The increase in “policy uncertainty” does not necessarily mean that policymakers exogenously introduced greater policy uncertainty. Instead, this likely reflects difficult policy environment: following the collapse of the great moderation, a broad consensus emerged about the needs to review the pre-crisis policy framework, but with less clarity about how exactly the policy framework should be modified.

8

Our finding is largely consistent with Barnett, Broadbent, Franklin, and Miller (2014).

9

The long-run elasticity is calculated as “coefficient on lagged return on assets” divided by “1 minus coefficient on lagged investment to capital.”

10

For UK firms, the coefficient is negative (0.445) and significant (Model 3), suggesting that business investment was more sensitive to demand prospects in pre-crisis periods than in post-crisis periods.

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Cover IMF Staff Country Reports
United Kingdom: Selected Issues
Author:
International Monetary Fund. European Dept.
Volume/Issue:
Volume 2014: Issue 234
Publisher:
International Monetary Fund
ISBN:
9781498304337
ISSN:
1934-7685
Pages:
66
DOI:
https://doi.org/10.5089/9781498304337.002
  • Figure 1.
    View in gallery
    Figure 1.

    Business Investment

    (Index, 2009Q1 = 100)

  • Figure 2.
    View in gallery
    Figure 2.

    UK: Business Investment

    (Indices, pre-recession peak=100)

  • Figure 3.
    View in gallery
    Figure 3.

    UK: Real Growth and Business Investment

    (Average; percentage points)

  • Figure 4.
    View in gallery
    Figure 4.

    Capital Productivity

    (GDP divided by net capital stock)

  • Figure 5.
    View in gallery
    Figure 5.

    UK: Growth of Gross Value Added, Capital, and Productivity 1/

    (Average growth in 1995–2007, percent)

  • Figure 6.
    View in gallery
    Figure 6.

    UK: Capital Productivity

    (Real GDP divided by net capital stock; 2000=100)

  • Figure 7.
    View in gallery
    Figure 7.

    UK: Decomposition of Capital Productivity Growth 1/

    (Percentage points)

  • Figure 8.
    View in gallery
    Figure 8.

    UK: Cost of Debt and Policy Rate

    (Median, percent, interest divided by total debt)

  • Figure 9.
    View in gallery
    Figure 9.

    Volatility of External and Domestic Demand

    (5-year rolling standard deviation of GDP growth, in percent)

  • Figure 10.
    View in gallery
    Figure 10.

    BCC Survey: Turnover Confidence: Next 12 Months

    (Balance in percent)

  • Figure 11.
    View in gallery
    Figure 11.

    UK: Bloom’s Policy Uncertainty

    (Index)

  • Figure 12.
    View in gallery
    Figure 12.

    UK: Real Lending Rates by Size of Loans

    (Percent, new fixed rate loans, deflated by CPI inflation)

  • Figure 13.
    View in gallery
    Figure 13.

    UK: Sectoral Credit Shift Indicator

Figure 1.

Business Investment

(Index, 2009Q1 = 100)
Figure 2.

UK: Business Investment

(Indices, pre-recession peak=100)
Figure 3.

UK: Real Growth and Business Investment

(Average; percentage points)
Figure 4.

Capital Productivity

(GDP divided by net capital stock)
Figure 5.

UK: Growth of Gross Value Added, Capital, and Productivity 1/

(Average growth in 1995–2007, percent)
Figure 6.

UK: Capital Productivity

(Real GDP divided by net capital stock; 2000=100)
Figure 7.

UK: Decomposition of Capital Productivity Growth 1/

(Percentage points)
Figure 8.

UK: Cost of Debt and Policy Rate

(Median, percent, interest divided by total debt)
Figure 9.

Volatility of External and Domestic Demand

(5-year rolling standard deviation of GDP growth, in percent)
Figure 10.

BCC Survey: Turnover Confidence: Next 12 Months

(Balance in percent)
Figure 11.

UK: Bloom’s Policy Uncertainty

(Index)
Figure 12.

UK: Real Lending Rates by Size of Loans

(Percent, new fixed rate loans, deflated by CPI inflation)
Figure 13.

UK: Sectoral Credit Shift Indicator